U.S. Treasury Secretary Janet Yellen and former Federal Reserve Chairman Ben Bernanke both said in separate speeches on Thursday that they believe the U.S. is likely to avoid a recession.

"I've long believed there is a path to a soft landing, with the potential to lower inflation while maintaining a strong labor market. To me, that's what the data suggests has happened," Yellen said in an interview with CNBC.

Bernanke said at an online event hosted by Fidelity Investments that the Fed has built in "a soft landing scenario, which is the best of all potential scenarios, with employment returning to normal, inflation returning to normal, and interest rates returning to normal."

But Bernanke also warned that the unemployment rate may not stabilize and will start to move higher.

“That could happen if the economy starts to slow, which we’re not seeing yet,” he said. “But it’s certainly possible if people start to lose confidence or even become dependent on policies that require a new government.”

He added that in that case the Fed would "have to respond."

Yellen stressed that the job market has cooled as unemployment has risen, although it remains low by historical standards, and inflation has fallen sharply.

She noted that progress in the "last mile" of fighting inflation was slower because of a lag in house price declines, but she believed housing costs would fall further as rental prices fell.

"Hopefully, this will be a stable situation as the Fed ensures that we have continued strength in the labor market and that inflation has come down quite a bit," Yellen said.

Yellen and Bernanke were the two figures who served as Fed chairs before Powell, with Yellen serving in the position from 2014 to 2018 before becoming Treasury secretary in 2021. Bernanke served from 2006 to 2014.

The comments came as the latest data showed that U.S. gross domestic product grew at an annualized rate of 3% in the second quarter. The final estimate confirmed that the economy grew faster in the second quarter than in the first quarter, when it expanded by 1.4%.

Meanwhile, initial jobless claims data for the week ended September 21 fell, with the weekly reading recording 218,000, below Wall Street expectations of 223,000. This was the lowest level since mid-May.

The Federal Reserve decided to cut interest rates by 50 basis points last week, its first easing policy since 2020.

Bernanke said he thinks the Fed could cut rates by another 50 to 75 basis points this year, meaning the Fed could cut rates by a larger 50 basis point at one of its remaining meetings this year.

According to the current median forecast of Federal Reserve officials, there will be two more rate cuts this year, each by 25 basis points.

Bernanke also forecast the Fed would cut rates by another 100 basis points next year, in line with the median forecast among policymakers. He said that would bring the Fed’s federal funds rate to around 3%, close to what the Fed appears to consider to be neutral, or a benchmark policy rate level that neither stimulates nor slows economic growth.

“In some sense, that’s the end goal,” Bernanke said. “Now, whether they get there or whether they get derailed by new information, new shocks, remains to be seen. But I think that’s where they expect rates to end up as they continue the process of lowering rates.”

The article is forwarded from: Jinshi Data